Offshore Cost Savings - Taxes

After salary costs and office costs, taxes are a key expense for offshore operations. If you have a captive (company owned operation) you pay the taxes directly and if you outsource, taxes are rolled into the rates charged by your offshore partner.

Figure 1 below provides an overview of corporate tax rates for key offshore services locations. Data is sourced from KPMG's Corporate and Indirect Tax Rate Survey 2008 which is an annual review of tax rates in over a hundred countries.

Some of the lowest corporate tax rates are in Eastern Europe. Bulgaria has the lowest at 10%. Hungary, Romania and Poland all have rates under 20%, less than half of the United States. The Czech Republic, Russia, and Ukraine also have moderately low rates of 25% or less.

Tax Rates for Top Offshore Outsourcing Locations - Figure 1

[caption id="attachment_298" align="alignleft" width="564" caption="Source: KPMG Corporate and Indirect Tax Rate Survey (2008)"][/caption]

Most Asian locations have average or above average rates. China is the lowest with 25%. Malaysia, Vietnam, Indonesia and Thailand are next with rates of 30% or less. On the high end are India, Pakistan and the Philippines which are between 34% and 35%.

Latin America, as with a number of metrics, shows significant variabilty. Chile is at the low end with 17% while Mexico is about average at 28% and Brazil is on the high end at 34%.